(Bloomberg Opinion) -- Few airlines can be entirely confident of their survival right now. Travel restrictions prompted by the new coronavirus have forced carriers to burn rapidly through their cash, with no guarantee of when any semblance of normality will return.

The ones in most danger are those that overextended themselves financially before the pandemic. Among the big European carriers, nobody pushed boundaries more than Norwegian Air Shuttle ASA, the budget transatlantic airline. 

Late on Wednesday, Norwegian spelled out what it will take to keep the lights on: Bondholders and lessors are being asked to convert a portion of more than $4 billion in liabilities into equity, so that the group can tap 3 billion kroner ($290 million) of loan guarantees offered by Norway’s government. Long-suffering shareholders face dilution but the airline is out of better options.

Having thrice raised capital from equity investors in the past couple of years and with the markets in turmoil, a rights issue would be challenging. Norwegian’s shares are capitalized at just $130 million, about half the list price of one of its Boeing 787 Dreamliner jets. It can’t borrow more without the government’s backing because lenders worry that its $5.7 billion of borrowings won’t be repaid. Some 250 million euros of Norwegian bonds maturing next year sell for less than half their face value.  

Norway is offering only modest help and on onerous terms, unlike the U.S., whose airlines have been promised up to $50 billion in assistance — even though many of them frittered away cash on share buybacks prior to this crisis.

Elsewhere, governments are rightly wary of rewarding struggling airlines for prior mismanagement and risking taxpayer cash on carriers that have significant international ownership and operations. That’s something Richard Branson’s Virgin Atlantic Airways Ltd. has discovered in its lobbying for help from the U.K.   

Until a recent change of management and strategy, Norwegian was too focused on growth, too tolerant of losses and bought too many planes. The carefree approach was summed up by its bizarre decision to set up a subsidiary in Argentina. The group held only about $290 million of cash at the end of December.

Most of the low-cost transatlantic services that have made Norwegian well known in the U.S. serve airports on Europe’s western fringe, not Oslo. Norwegian generates only about one-fifth of its sales from domestic customers and most of its staff are based overseas. It’s no wonder Norway’s help is contingent on the company boosting its balance sheet and making shareholders and lenders pay a price.

The company has already asked bondholders to forgo debt service payments and has withheld some lease payments, without apparent repercussions. But getting lenders to agree to swap the money that’s owed to them into equity won’t be straightforward. The financing arrangements are complicated. Norwegian’s once-valuable takeoff slots at London’s Gatwick Airport have been already pledged as security for borrowings, and many of its planes are leased.

Even if some of its debt burden is erased, the airline’s prospects look bleak. To protect themselves from a possible insolvency, credit card processors have withheld cash due to Norwegian from ticket sales. With their trips now cancelled, customers have asked for their money back. Large fixed costs will drain the company’s cash until its planes can fly again. Founder and former Chief Executive Officer Bjorn Kjos has sold a big chunk of shares, which isn’t encouraging.  

Norwegian must hope that lenders decide it’s worth preserving the airline in its current form, rather than letting it collapse and stripping it for assets. Its finances are poor but the brand is decent. Passengers love paying very little to fly across the Atlantic on a shiny new plane.

Norwegian has repeatedly defied predictions of its demise. But this latest rescue attempt looks like a final desperate gambit.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

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